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Factors to Consider When Applying for Immediate Retirement Under FERS

There are many things to consider when applying for immediate retirement under FERS. These include Social Security eligibility and the survivor’s benefit. It would help if you also considered the cost of living adjustment and taxes on the lump-sum payment. In this article, you’ll learn about important factors you should consider to maximize your benefits. After all, your retirement is the biggest financial decision of your life. Unfortunately, with so many options, it’s easy to get confused about the process.

Survivor’s Benefit

If you’re considering applying for immediate retirement under the federal employees retirement system, you should know the survivor’s benefit. Survivor benefits are available for surviving spouses and children. If you’re married with children, they can receive them up to 18. Disabled children can receive survivor benefits until they’re 22 years old. These benefits can significantly reduce the survivor’s annuities under FERS.

Before you apply for immediate retirement under FERS, you need to know whether you will qualify for a survivor’s annuity. During your civil service, you must have contributed to FERS. In addition, you must have worked for at least five years to qualify. Your employer must provide you with a certified summary of your federal service during this time. You can request an extension if your employer is unwilling to issue a certified summary.

Social Security Eligibility

Depending on your age, you may be eligible for Social Security benefits when you apply for immediate retirement under FERS. The supplement is calculated as if you were full-insured for Social Security retirement benefits at age 62. You should calculate this amount by estimating your Social Security retirement benefit over a forty-year career. Then, multiply that amount by the years you worked under FERS. An earnings test also reduces the supplement by $1 for every $2 of your wages during your work period. The FERS Basic Annuity is not included in this earnings test.

You can qualify for an immediate annuity if you have more than twenty years of civilian service. However, if you left the federal service before age 50, your pension will be reduced by the amount of Social Security you received during your employment. If you have less than twenty years of civilian service, you can still qualify for an immediate retirement benefit under FERS. This method is best for government workers with many years of service.

Cost of Living Adjustment

Federal employees who plan to apply for immediate retirement under FERS should note that the first cost-of-living adjustment (COLA) is not scheduled until age 62. The COLA will be prorated to reflect how many months of benefits have been accrued before December 1. In addition, the first COLA after annuity commencement is based on the CPI increase that occurred in the twelve months before December 1.

Your COLA is based on the Consumer Price Index (CPI), which is 2% if the CPI is between two and three percent. If the CPI falls below two percent, your COLA is 1%. Remember that the amount of your annuity is subject to federal and state taxes, which can add up to a substantial chunk of your income.

Taxes on Lump-Sum Payments

If you’re 61 and apply for immediate retirement under FERS, you may wonder if you must pay taxes on your lump-sum payment. It is because FERS annuities have certain tax rules. If you take out a lump-sum payment before the IRS has processed your tax return, you’ll likely have to pay more taxes than you should. 

If you’re a federal employee who applied for immediate retirement under FERS, you may be entitled to a refund of your contributions. The interest rate is the same as that on government securities. However, you may have to pay more taxes if you had less than five years of federal service before you decided to retire under FERS.

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